"Old" VIX Plunges To Record Low

Before there was VIX, there was VXO (or "old" VIX) based on OEX calls and puts and trading all the way back to 1985. Because it covers the 1987 crash period, traders often use it as a more consistent gauge. While attention is focused on VIX being 'near' record lows; VXO has just broken below the crucial 9% level that has only been breached once before and has hit a record low. As Citi warns, this suggests that we are very close to if not at the cycle low (for volatility) - though as we noted yesterday, it is unclear if this is a 'good' low (melt-up in stocks) or 'bad' low (crash).

For only the 3rd time in its history the VXOhas broken below 9%. The first time it did this was December 1993 (8.86%) and then Jan 2007 (8.99%). It came very close in July 2005 when it went to 9.12%.

But this week it it hit all-time record lows... or record highs in complacency.

* * *

NOTE:

VIX:

The Chicago Board Options Exchange Volatility Index reflects a market estimate of future volatility, based on the weighted average of the implied volatilities for a wide range of strikes. 1st & 2nd month expirations are used until 8 days from expiration, then the 2nd and 3rd are used.

VXO:

The CBOE OEX Volatility Index reflects a market estimate of future volatility, based on the weighted average of the implied volatilities of 8 OEX calls & puts. (The nearest in & out of the money call & put options from the 1st and 2nd month expirations)

Of course it is at record lows! We have had an economic revovery! But growth is still low, as in inflation, so the Fed will continue to prop up...er, I mean support bond prices and continue QE. But we are tapering, because everything is gradually improving! Stocks are not in a bubble even though they are at record highs because unemployment is imrpoving, albeit too slowly, thus the bond purchases. Hey look, it's Elvis!

It might be double-speak, but based on the articles today (consumer confidence, West Housing Prices) it appears we are entering a new economic era where the Fed as finally eliminated the business cycle. Perpertual growth from now until forever.

Fill out the correct answer:
The world is -->
1) falling apart
2) healing
3) same ol', same ol'.
Note to members of the US government, the European Parliament, the Fed, the ECB and private banking institutions: in order not to compromise the validity of this test, please refrain from taking it.

Can't happen, circuit breakers go off at 7% down on the S&P. What will happen is that the opening prints upon reopening will cause the next round of circuity breakers to trigger before anybody can really get out.

Yes there is a circuit breaker but if it gets thrown on Day 1, on Day 2 it will get thrown again and then again on Day 3.

The money is real but now the market's long participants are eating out of the master's hand. They are eating well but out of their master's hand. That hand can be pulled away at any time. How many areas of life in the U.S. are like this? Many. I will not submit to it and that is why I will not participate.